Participating Preferred Stock

A preferred stock entitles the owner to receive a predetermined sum of cash (usually the original investment plus accrued dividends), and also allows its holders to participate on an "as-if-converted-basis" with the common stock holders in any remaining proceeds of a defined "liquidation" event. The holder need not elect to convert or receive the liquidation preferred, hence the name "double dip". The right, however, to double dip may be capped at, say, the recoup of sale proceeds no greater than 2X, or two times the liquidation preference; to make more, the holder must convert.